Wheat drops fast on Ukraine-Russia deal, but it's still a weather market

The wheat market dropped pretty hard Thursday and Friday on news of a deal to allow grain to be shipped out of Ukraine and Russia .

"If it follows through and we do see both Russia and Ukraine abiding by the rules, we will see some wheat coming out of this area and supplying the world," Randy Martinson of Martinson Ag Risk Management told Don Wick of the Red River Farm Network on this week's Agweek Market Wrap. However, Martinson thinks the extent of the drop was an overreaction to "pull some air out" of the wheat market.

Read more market news:

1. August WASDE report upped soybean outlook but weather is still the main trade focus
2. U.S. farmers to harvest record soy crop on massive yields
3. The ever-changing forecast leads to an about-face in the markets
4. Market rollercoaster moves up and down on weather, Ukraine grain shipments and U.S. export sales
5. Improving conditions and Ukraine exports move markets

While the deal would be in the best interests of both Ukraine and Russia, Martinson and Wick said skepticism remains of what will happen going forward.

Meanwhile, the strength of the U.S. dollar is pricing the U.S. out of the wheat market, along with higher shipping costs. But Martinson said Egypt's move to lower acceptable protein levels may make the U.S. more competitive.

The winter wheat crop was disappointing production wise, though quality was good, Martinson said. Now the attention has turned to the spring wheat crop and next week's Wheat Quality Council spring wheat and durum tour, which goes through North Dakota and parts of surrounding states. Martinson, who was in Chicago during the Market Wrap taping, said the state of the spring wheat crop had been a topic of conversation during his trip.

Also during his time in Illinois Martinson experienced the heat enveloping much of the country. Rain was pulled out of the forecast there, and Martinson said crops are going "a little bit backwards." Cooler, wetter weather is in the forecast, and Martinson said that's what will be needed to get corn and soybeans to their potential in the Corn Belt.

"We're still in a weather market," he said.

Drought and heat also keep playing a role in the cattle market, Wick and Martinson discussed.

The Agweek Market Wrap is sponsored by Gateway Building Systems.